1) which of the following legal fees should be capitalized?
2) green co. received merchandise on consignment. as of january 31, green included the
goods in inventory, but did not record the transaction. the effect of this on its financial
statements for january 31 would be
a.net income, current assets, and retained earnings were overstated
b.net income was correct and current assets were understated
c.net income and current assets were overstated and current liabilities were understated
d.net income, current assets, and retained earnings were understated
3) which disclosure method do most companies use to display the components of other
comprehensive income?
a.combined statement of retained earnings
b.second income statement
c.combined statement of comprehensive income
d.as part of the statement of stockholders’ equity
4) written, inc. has outstanding 500,000 shares of $2 par common stock and 100,000
shares of no-par 8% preferred stock with a stated value of $5. the preferred stock is
cumulative and nonparticipating. dividends have been paid in every year except the past
two years and the current year.
assuming that $305,000 will be distributed, and the preferred stock is also participating,
how much will the common stockholders receive?
a.$185,000
b.$150,000
c.$155,000
d.$80,000
5) on january 1, 2012, ott co. sold goods to flynn company. flynn signed a
zero-interest-bearing note requiring payment of $90,000 annually for seven years. the
first payment was made on january 1, 2012. the prevailing rate of interest for this type
of note at date of issuance was 10%. information on present value factors is as follows:
ott should record sales revenue in january 2012 of
a.$481,972
b.$438,156
c.$391,977
d.$321,300
6) what accounting concept justifies the usage of depreciation and amortization
policies?
a.going concern assumption
b.fair value principle
c.full disclosure principle
d.monetary unit assumption
7) on january 1, 2012, orton co. sold a used machine to king, inc. for $700,000. on this
date, the machine had a depreciated cost of $490,000. king paid $100,000 cash on
january 1, 2012 and signed a $600,000 note bearing interest at 10%. the note was
payable in three annual installments of $150,000 beginning january 1, 2013. orton
appropriately accounted for the sale under the installment method. king made a timely
payment of the first installment on january 1, 2013 of $260,000, which included interest
of $60,000 to date of payment. at december 31, 2013, orton has deferred gross profit of
a.$140,000
b.$132,000
c.$120,000
d.$102,000
8) jones company was formed on december 1, 2011. the following information is
available from jones’s inventory record for product x.
a physical inventory on march 31, 2012, shows 2,200 units on hand.
instructions
prepare schedules to compute the ending inventory at march 31, 2012, under each of the
following inventory methods:
(a)fifo.
(b)lifo.
(c)weighted-average.
show supporting computations in good form.
9) how should a “gain” from the sale of treasury stock be reflected when using the cost
method of recording treasury stock transactions?
a.as ordinary earnings shown on the income statement
b.as paid-in capital from treasury stock transactions
c.as an increase in the amount shown for common stock
d.as an extraordinary item shown on the income statement
10) when a company discontinues an operation and disposes of the discontinued
operation (component), the transaction should be included in the income statement as a
gain or loss on disposal reported as
a.a prior period adjustment
b.an extraordinary item
c.an amount after continuing operations and before extraordinary items
d.a bulk sale of plant assets included in income from continuing operations
11) on december 31, 2012, kessler company granted some of its executives options to
purchase 75,000 shares of the company’s $10 par common stock at an option price of
$50 per share. the options become exercisable on january 1, 2013, and represent
compensation for executives’ services over a three-year period beginning january 1,
2013. the black-scholes option pricing model determines total compensation expense to
be $450,000. at december 31, 2013, none of the executives had exercised their options.
what is the impact on kessler’s net income for the year ended december 31, 2013 as a
result of this transaction under the fair value method?
a.$150,000 increase
b.$0
c.$150,000 decrease
d.$450,000 decrease
12) the process of formally recording or incorporating an item in the financial
statements of an entity is
a.allocation
b.articulation
c.realization
d.recognition
13) milford company had 500 units of tank in its inventory at a cost of $4 each. it
purchased, for $2,800, 300 more units of tank. milford then sold 400 units at a selling
price of $10 each, resulting in a gross profit of $1,600. the cost flow assumption used
by johnson
a.is fifo
b.is lifo
c.is weighted average
d.cannot be determined from the information given
14) accounting information is considered to be relevant when it
a.can be depended on to represent the economic conditions and events that it is intended
to represent
b.is capable of making a difference in a decision
c.is understandable by reasonably informed users of accounting information
d.is verifiable and neutral
15) the following trial balance was taken from the books of fisk corporation on
december 31, 2012.
a.insurance expired during the year, $2,000.
b.estimated bad debts, 1% of gross sales.
c.depreciation on equipment, 10% per year.
d.interest at 6% is receivable on the note for one full year.
e.rent paid in advance at december 31, $5,400 (originally charged to expense).
f.accrued salaries and wages at december 31, $5,800.
(a)prepare the necessary adjusting entries.
(b)prepare the necessary closing entries.
16) unrealized holding gains or losses which are recognized in income are from
securities classified as
a.held-to-maturity
b.available-for-sale
c.trading
d.none of these
17) recycle exploration is involved with innovative approaches to finding energy
reserves. recycle recently built a facility to extract natural gas at a cost of $15 million.
however, recycle is also legally responsible to remove the facility at the end of its useful
life of twenty years. this cost is estimated to be $21 million (the present value of which
is $8 million). what is the journal entry required to record the asset retirement
obligation?
a.no journal entry required
b.debit natural gas facility for $21,000,000 and credit asset retirement obligation for
$21,000,000
c.debit natural gas facility for $6,000,000 and credit asset retirement obligation for
$6,000,000
d.debit natural gas facility for $8,000,000 and credit asset retirement obligation for
$8,000,000
18) at the beginning of 2012, winston corporation issued 10% bonds with a face value
of $1,200,000. these bonds mature in five years, and interest is paid semiannually on
june 30 and december 31. the bonds were sold for $1,111,680 to yield 12%. winston
uses a calendar-year reporting period. using the effective-interest method of
amortization, what amount of interest expense should be reported for 2012? (round your
answer to the nearest dollar.)
a.$133,000
b.$133,400
c.$133,804
d.$137,664